THE LIMITED VALUE OF THE

HISTORICAL GROWTH
EXPERIENCE:
DIFFERING INITIAL
CONDITIONS
 THE LIMITED VALUE OF THE HISTORICAL
GROWTH EXPERIENCE: DIFFERING INITIAL
CONDITIONS

The position of developing countries today is in

many important ways significantly different from
that of the current developed countries when they
embarked on their era of modern economic growth.
 EIGHT SIGNIFICANT DIFFERENCES
 Physical and Human Resource endowments
 Per capita incomes and levels of GNP in relation
to the rest of the world
 Climate
 Population size, Distribution, and Growth
 Historical Role of International Migration
 International Trade benefits
 Basic Scientific and Technological Research and
Development Capabilities
 Stability and Flexibility of Political and Social
institutions
 THE LIMITED VALUE OF THE HISTORICAL
GROWTH EXPERIENCE: DIFFERING INITIAL
CONDITIONS

We will discuss each of these conditions with a

view to formulating requirements and priorities for
generating and sustaining economic growth as we
enter the twenty-first century.
PHYSICAL AND HUMAN RESOURCE
ENDOWMENTS

A few developing nations are blessed with abundant supplies of

petroleum, other minerals, and raw materials for which world
demand is growing; most less developed countries, however-
especially in Asia, where more than half other world’s
population resides-are poorly endowed with natural resources.
PHYSICAL AND HUMAN RESOURCE
ENDOWMENTS
 PHYSICAL AND HUMAN RESOURCE
ENDOWMENTS

Paul Romer argues that today’s developing

nations “are poor because their citizens
do not have access to the ideas that are
used in industrial nations to generate
economic value”.

Paul Michael Romer is an American economist, a pioneer of endogenous growth theory , and a co-
recipient of the 2018 Nobel Memorial Prize in Economic Sciences. He received the prize "f or
integrating technological innovations into long-run macroeconomic analysis“.
PHYSICAL AND HUMAN RESOURCE
ENDOWMENTS
For Romer, the technology gap between rich and poor
nations can be divided into two components.

Physical Object gap involving factories, roads, and

modern machinery.
Idea gap including knowledge about marketing,
distribution, inventory control, transactions processing,
and worker motivation.
PHYSICAL AND HUMAN RESOURCE
ENDOWMENTS

It is this idea gap, or what Thomas

Homer-Dixon calls the Ingenuity gap
(the ability to apply innovative ideas to
solve practical social and technical
problems), between rich and poor
nations that lies at the core of the
development.

Director of the Center for the Study of Peace and Conflict at the and Associate Professor in
the Department of Political Science at the University of Toronto.
PHYSICAL AND HUMAN RESOURCE
ENDOWMENTS
INGENUITY GAP

The rich and poor are now beginning to live in radically different realities around the world. This may
radically limit our ability to compromise to solve our problems - such as climate change - because we
lack a strong sense of global community.
RELATIVE LEVELS OF PER CAPITA
INCOME AND GNP

The people living in low-income countries have, on average, a

lower level of real per capita income than their developed-
country counterparts had in the nineteenth century.

Today’s developed nations were economically in advance of the

rest of the world. They could therefore take advantage of their
relatively strong financial position to widen the income gaps
between themselves and less fortunate countries in a long
period.
RELATIVE LEVELS OF PER CAPITA
INCOME AND GNP
 CLIMATIC DIFFERENCES

Almost all developing countries are situated in tropical or

subtropical climatic zones. It has been observed that the
economically most successful countries are located in the
temperate zone.

It is undeniable that the extremes of heat and humidity in most

poor countries contribute to deteriorating soil quality, and the
rapid depreciation of many natural goods. They also contribute
to the low productivity of certain crops, the weakened
regenerative growth of forests, and the poor health of animals.
CLIMATIC DIFFERENCES
POPULATION SIZE, DISTRIBUTION AND
GROWTH

At this point, it is sufficient to note that population size,

density, and growth constitute another important difference
between less developed and developed countries.
Before and during their early growth years, Western nations
experienced a very slow rise in population growth. As
industrialization proceeded, population growth rates increased
primarily as a result of falling death rates but also because of
slowly rising birth rates.
POPULATION SIZE, DISTRIBUTION AND
GROWTH

September 4, 2019
6:30:15

https://www.worldometers.info/world-
population/
 POPULATION SIZE, DISTRIBUTION AND
GROWTH

https://www.worldometers.info/world-population/ September 4, 2019 6:35:03

 POPULATION SIZE, DISTRIBUTION AND
GROWTH

https://www.worldometers.info/world-population/
 POPULATION SIZE, DISTRIBUTION AND
GROWTH

Population in the world is

currently (2019-2020) growing
at a rate of around 1.08% per
year (down from 1.10% in
2018, 1.12% in 2017 and
1.14% in 2016). The current
average population increase is
estimated at 82 million
people per year.

https://www.worldometers.info/world-population/
 THE HISTORICAL ROLE OF
INTERNATIONAL MIGRATION

In the nineteenth and early twentieth centuries, there was a

major outlet for excess rural populations in international
migration, which was both widespread and large-scale.

In countries such as Italy, Germany, and Ireland periods of

severe famine or pressure on the land often combined with
limited economic opportunities in urban industry to push
unskilled rural workers toward the labor-scarce nations of
North America and Australia.
 THE HISTORICAL ROLE OF
INTERNATIONAL MIGRATION

As Brinley Thomas argues, “three outstanding contributions of

European labor to the American economy

•1,187,000 Irish and 919,000 Germans between 1847 and

1855
•418,000 Scandinavians and 1,045,000 Germans between
1880 and 1885
•1,754,000 Italian between 1898 and 1907-had the character
of evacuations”
 THE HISTORICAL ROLE OF
INTERNATIONAL MIGRATION
During the 1950s and especially 1960s, surplus rural workers from
southern Italy, Greece, and Turkey flocked into the areas of labor
shortages, most notably West Germany and Switzerland.

This provided a valuable dual benefit to the relatively poor areas from
which these unskilled workers migrated.

The home government were relieved of the costs of providing for people
who in all probability would remain unemployed, and because a large
percentage of the workers earnings were sent home, these governments
received a valuable and not insignificant source of foreign exchange.
THE HISTORICAL ROLE OF
INTERNATIONAL MIGRATION
 THE HISTORICAL ROLE OF
INTERNATIONAL MIGRATION

34,369,32
867,596,29
2
9,792,726
37,472,462
25,258,149
65,156,486
46,740,129
March12, 2019, worldatlas.com/articles/highest-immigrant-population-in-the-world.html
INTERNATIONAL TRADE BENEFITS

International free trade has been called

the “engine of growth” that propelled
the development of today’s economically
advanced nations during the nineteenth
and early twentieth centuries.

Rapidly expanding export markets

provided an additional stimulus to
growing local demands that led to the
establishment of large-scale
manufacturing industries.
 BASIC SCIENTIFIC AND TECHNOLOGICAL
RESEARCH AND DEVELOPMENT CAPABILITIES

Basic scientific research and technological development have

played a crucial role in the modern economic growth experience
of contemporary developed countries.

In contrast, when the latter countries were embarking on their

early growth process, they were scientifically and
technologically greatly in advance of the rest of the world.
 BASIC SCIENTIFIC AND TECHNOLOGICAL
RESEARCH AND DEVELOPMENT CAPABILITIES

ENDOWNMENTS PRODUCTIVITY PROSPERITY

COMPETITIVENESS
 STABILITY AND FLEXIBILITY OF
POLITICAL AND SOCIAL INSTITUTIONS

Another difference between most developing countries and most

developed countries at the time of their early stages of economic
development lies in the efficacy of domestic economic, political,
and social institutions.

By the time of their early industrialization, many developed

countries, notably the United Kingdom, the United States, and
Canada, had economic rules in place that provided relatively
broad access to opportunity for individuals with entrepreneurial
drive.
END